Retiring as a couple: Strategies for planning and enjoying retirement together

a) Spousal RRSP: A strategic tool

Spouses with an income gap may find a spousal RRSP a useful strategy for accumulating savings. Basically, the person with the higher income contributes to the other's RRSP.

1. Immediate benefit: The contributing spouse enjoys a tax deduction, thus reducing their taxable income.
2. Future benefit: Upon retirement, withdrawals are taxed to the plan holder (spouse), often at a lower rate. Result: The household's taxes decrease.

This strategy is an effective way to balance future income. Caution: Withdrawing funds too soon after making a contribution may negate the tax benefit. Don't hesitate to ask a specialist for more details.

b) Pension income splitting

Retirees can allocate up to 50% of their eligible pension income to a partner on tax returns. The advantage? Taxes are progressive, so a person earning $80,000 pays a much higher marginal rate than someone earning $20,000. Splitting a couple's income to $50,000 each reduces their average tax rate. Result: Pay less total tax, keep more money in your pocket.

c) RRIF withdrawals for couples

When converting an RRSP to a RRIF (mandatory at age 71), you can choose to base the mandatory minimum withdrawal on your spouse's age rather than your own. If your partner is younger, the minimum withdrawal percentage will be lower, enabling you to shelter more money from taxation for longer and better control your annual taxable income.

d) Splitting QPP funds between spouses

Splitting QPP funds means transferring a portion of the pension rights accumulated during your life together to your spouse. This strategy can be advantageous in the following circumstances:

• One spouse has contributed significantly more to the QPP than the other
• You want to balance your taxable retirement income
• You wish to reduce your total tax bill as a couple

Unlike pension income splitting (which is only done on tax returns), QPP splitting actually transfers pension rights. Each spouse would then receive their own cheque from Retraite Québec. This request can be made as soon as both spouses are aged 60 or over.

Please note: This strategy requires spouses to apply together and can impact other benefits. We recommend that you work out the calculations with a specialist before proceeding.

a) Seek guidance from a neutral expert

Answers to retirement questions aren't always obvious—and spouses don't always agree. At what age can you start? How much can you withdraw and from which account? Should we sell the house or keep it? Should I defer my QPP pension or not?

This is when help from a specialist can be invaluable. Benefit from an objective, neutral viewpoint, see models of various scenarios when compromise is required, and obtain an overall view of your finances via asset consolidation.

"It's great when there's a spouse who's more comfortable with finances. Sharing knowledge is a good thing, but it's also important to have an independent resource you can trust so you know who to turn to if things go wrong," emphasizes Sébastien Lafontaine.

Not sure who to contact? Our FlexiFonds mutual fund advisors can offer a neutral perspective on your situation. They do not receive a commission. Their sole aim is to help you choose the best solution without pressure.

b) Share access and visibility

Make a combined list of all your accounts, passwords, insurance policy numbers, loans, and investments. Even if one spouse tends to manage your finances, the other needs to know where everything is and how to access it.

c) Develop individual skills

Even if one spouse has always managed the budget and investments, the other must be able to do the following:

• Pay bills and track expenses
• Access online accounts and download statements
• Understand an investment summary
• Redo a budget if necessary
• Know who to contact (advisor, notary, accountant)

d) Hold a quarterly financial review

Take an hour each season to review your budgets, projects, yields, and adjustments. See it as a chance to learn together and make sure no one is left in the dark.

a) In the event of death

If one of you has an employer-sponsored pension plan, the question of continuity is crucial. In the event of death, most plans automatically offer a joint and survivor pension to the surviving spouse (usually 60% of the pension). Giving up this protection may seem advantageous in the short term (higher annuity), but it can undermine the financial security of the person left behind.

b) Wills and estate planning: Putting your affairs in order

Planning for retirement as a couple also means planning for what happens if one of you dies or becomes incapacitated. Four essential actions:

• Update your will: Who inherits what? Who will handle the estate (liquidator)? Do you have children from previous unions or any special clauses to consider?
• Check beneficiary designations: Certain investments and life insurance policies are paid directly to designated beneficiaries regardless of what your will says. Make sure these designations are up to date.
• Prepare a protection mandate: This document designates who will make financial and personal decisions if you become incapacitated.
• Delegate power of attorney: This allows your spouse to manage your accounts in the event of temporary incapacity.
• Tax tip: Designating your spouse as beneficiary of your RRSP/RRIF allows for a tax-deferred transfer (tax is only paid when the surviving spouse withdraws the money). For other beneficiaries, the entire RRSP/RRIF is taxed in the year of death.

Make an appointment with a notary to ensure that everything is in order—it's a matter of mutual protection.